Taxes

Starve the Tax Man

Americans are increasingly reluctant to pay the IRS. Who can blame them?

|

Americans are dodging income taxes at a growing pace. They have good reason to do just that.

Taxes are, as per a handy Internal Revenue Service (IRS) guide for students, "required payments of money to governments that are used to provide public goods and services for the benefit of the community as a whole." Yet our politically divided countrymen find little agreement over what constitutes "benefit" or "appropriate payments" and often act as if government is better used to punish enemies than to help anybody. That has, in turn, fueled an understandable reluctance to cough up cash for what's offered.

In the latest IRS figures, voluntary tax compliance for 2008–10 is 81.7 percent of the revenue the federal government believes it's entitled to collect. That's down from 83.1 percent in 2006. The slide "does not support concluding that noncompliance has increased," say the tax men. But that's pretty much what they said when disappointing numbers prompted then–Sen. Max Baucus (D–Mont.) to call, in 2004, for 90 percent compliance by 2010—a deadline he later extended to 2017. That's not the direction things moved.

We should hope those numbers head over the cliff's edge in the years to come.

Good government types like to justify taxes by citing Oliver Wendell Holmes, who called them "the price we pay for a civilized society." But they'd be well-advised to remember the words of Thomas Aquinas, who believed governments were entitled to impose taxes for "the common good" but that "if they extort something unduly by means of violence, it is robbery even as burglary is."

In his classic 1993 book, For Good and Evil: The Impact of Taxes on the Course of Civilization, the late tax historian Charles Adams pointed out that "people instinctively, in all ages, have called tax men robbers because they operate by threats and intimidations and don't pay for what they take." Resentment brews, too, because taxes do not fit any traditional definition of a voluntarily incurred debt. "A tax is owed because a government orders it to be paid," Adams added. "Nothing else is required."

Maybe that's all right if what you're ordered to pay for benefits you in an obvious and desirable way. But if you deeply resent the forced extraction of your income so that it can be spent on wars of aggression, corporate subsidies, welfare payments, punitive law enforcement, or other purposes you find abhorrent, any budding appreciation is likely to die on the vine. War tax resisters have a long and proud history of trying to deny fuel to the military machine. After years of public life, libertarian icon Karl Hess lived a life of barter to deny the state any undeserved pound of flesh.

It's even worse if you live in a fractured society in which the factions have turned against one another—21st century America, say—and the instruments of the state are used as bludgeons with which to harm a temporary ruling clique's perceived enemies.

The Obama administration's Operation Choke Point used regulatory power to intimidate banks into denying financial services to legal businesses, such as payday lenders and gun retailers, that had lost the support of the rulers of the moment. Likewise, the current president threatens burdensome taxes and antitrust investigations on disfavored companies and media operations. Nobody pretends these moves are anything other than punishment for those who have rubbed the ruling class the wrong way.

Funding for these abusive government efforts comes courtesy of the IRS. The tax agency itself has a long history of politicization in high-profile cases, including the recent targeting of Tea Party groups and President Richard Nixon's harassment of political enemies through the "Special Services Staff."

"It never occurred to me at the time that the IRS could be used as a political tool," former Revenue Officer Richard M. Schickel wrote of tips about alleged tax evasion in his self-published 2015 memoir, IRS Whistleblower. "Every case in the IRS is coded as to the source of information. As you can imagine if you got a code that said the case was from the White House or Congress that got top priority."

Adams, the tax historian, agreed. "The executive branch of the government has used the IRS to harass, punish, and even destroy businesses, prominent individuals, unpopular political organizations, senators, congressmen—just about anybody," he wrote. "Even more threatening and dangerous to the nation is the abuse of power by the IRS itself against those people it doesn't like.…Senators Edward Long and Joseph Montoya were both toppled from power when they sought to have the Senate hold hearings on IRS misdeeds."

"To some employees, the taxpayer is the enemy," Schickel said.

Given that, it's no wonder tax collectors are so easy to weaponize. One need merely turn them loose against a population they already despise.

"A system that allows billionaires to exist" is immoral, insists Rep. Alexandria Ocasio-Cortez (D–N.Y.), who plays to her hipster-socialist base with vows to slap punitive taxes on the prosperous.

"A small group of families has raked in a massive amount of the wealth American workers have produced," agrees Sen. Elizabeth Warren (D–Mass.), who wants to confiscate part of their accumulated assets.

"I can't wait to tax Howard Schultz back into the middle class," tweeted progressive columnist Ian Millhiser after the former Starbucks CEO floated a possible independent presidential run.

"They will be taxed like never before," President Donald Trump threatened after motorcycle manufacturer Harley-Davidson announced plans to move some production overseas in defiance of the president's nationalistic economic policies. That echoes his vows to punish Amazon for criticism of his administration published in The Washington Post, owned by the retail giant's founder and CEO, Jeff Bezos.

Forget the idea of forced payments for undesired benefits. Here we have malicious political actors threatening to inflict punitive taxes enforced by historically abusive collectors against people they dislike. It's a weaponized tax system funded by what it extracts from its victims.

A voluntary compliance rate of 81.7 percent and dropping? For a government that has seen a decadeslong decline in measures of public trust, that level of compliance is surprisingly high.

And why are people so willing to turn over their hard-earned income to the tax man? "The power of the IRS is the power of FEAR," Schickel explained in his book. And fear can go a long way toward propping up unpopular regimes.

But fear will only take you so far.

"A government that shackles its people with grossly inequitable tax laws and despotic enforcement practices loses all moral persuasion with respect to compliance and can hardly complain if its taxpayers resort to all kinds of schemes to protect themselves, including illegal ones," Adams warned in his book.

So far, taxpayers have chosen to protect themselves in quietly growing numbers, with minimal drama. Unless they're given reason to reconsider, we should expect—and hope—that their rebellious ranks will grow.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

64 responses to “Starve the Tax Man

  1. Missing from Tuccile’s article, is any suggestion as to what should be changed and why. Isn’t this a libertarian magazine promoting libertarian policy, rather than just reporting what’s happening? So let me make a suggestion.

    If government is “to provide public goods and services for the benefit of the community as a whole” then perhaps we should limit what “public goods and services” government offers, far more than now. To me, the libertarian position is the federal government exists to protect our freedoms, and deal with those who harm others; offering only the military (protecting us from invaders, yet they’re doing so much more) and the courts. It shouldn’t be in the business of providing retirement income or medical care, because that benefits specific individuals, not “the community as a whole” who were harmed by taxes taken from them. And I’m willing to allow local governments to provide police, roads and to regulate utilities where competition doesn’t exist. But it seems government wants its sticky fingers involved in all aspects of commerce, because as Willie Sutton said “That’s where the money is” (though he was short sighted and only speaking of the money in banks, which is far less than the money in commerce).

    There – that eliminates over half of existing government, and the taxes we pay as well.

    1. The federal government should offer very little. Our tax scheme is inverted from what it should be. More taxes should be imposed the closer they are to the people. Local over state over feds. That way the robber barons are at least accountable to the people. It would also stop the conflation of the richest counties being around d.c.

    2. Exactly; the problem isn’t the high taxes or the State’s increasing desperation to squeeze money out of the populace; those are symptoms. The problem is the vast array of tasks the State has taken on, many of them not worth doing in the first place, and most of the rest being things the State does badly. Get the government the hell out of matters that the Constitution should bar it from meddling in, and things involving subtlety or taste (which the Government is unsuited to) and the need for so much tax burden will vanish.

      1. If anyone took the 9th and 10th amendments seriously the federal government would be about 1/4 its current size. Really we’d only have maybe a half dozen departments with everything else being left to the states and the people. But power corrupts, so here we are.

    3. Missing from your comment is any way to get from here to there.

      It’s all fine and dandy to jump up and down and say feds shouldn’t be in the business of providing retirement or retiree/poor medical. If wishes were fishes we’d all swim in riches.

      But so far all the people who are doing that jumping up and down have elected precisely zero critters who can make it happen and there are precisely zero entrepreneurs who are actually attempting to provide that service via a true free market (that is – without just turning the free money tree from govt into a money tree that benefits them while still requiring govt to coerce).

      1. No, that’s not missing… it’s just irrelevant, as is this entire article and the opinion it promotes.

        1) 9 year old data on such things is bullshit and has no value.
        2) This is 08-10, the start of the recession. A few other economic things were going on at that point and this article doesn’t even acknowledge that.
        3) The comparison is only to the previous span that just happened to be far better economically. Again, this wasn’t mentioned. One data point to the next doesn’t make a trend, and it certainly isn’t a predictor.
        4) The author suggests motives and agendas without a bit of evidence that this is a factor, let alone that it is the primary cause.

        This article belongs in the dung heap that so many articles, ironically written in a magazine called Reason now belong.

    4. “The power to tax is the power to destroy.” Since Caesar too is a mere mortal, he should be treated accordingly (not given special privileges and immunities – and certainly not the ability to take justly acquired property by force). In the marketplace, one must convince the other party that he would benefit from parting with his cash in exchange for the good/service in question. Any other method is theft, and, when institutionalized, nothing short of tyranny.

      What can be done about this abomination, you ask? Can one slay Leviathan without participating in its own political game?

      Absolutely!

      https://docs.google.com/document/d/1ey7Rr5el6sZO944m4gTW99dORCS4Vhbzn9xq4smVtAs/edit?usp=sharing

  2. I’ve said for years that I’m perfectly willing to pay my fair share of taxes, as long as you accept that a “fair” price is any price mutually agreed upon. A “fair” price for a bottle of water or a gallon of gas is whatever price the merchant is willing to offer it for and a customer is willing to pay for it (and this price naturally varies according to supply and demand as circumstances like hurricanes dictate) but the IRS has never once offered me a “take it or leave it” option or a haggling option as a merchant would. I’m not allowed to walk away from the proposed deal or make a counter offer, I’m just told what my “fair share” is and that amount is extracted from me under threat of violence. There’s no way this fits my definition of “fair”.

    And then of course there’s the legitimacy of taxes being questioned along with the legitimacy of the government doing the taxes – as it becomes increasingly clear that government is most certainly not “the things we choose to do together” but simply whatever the “some animals are more equal than others” ruling class chooses to cram down our throats on the basis that they are noble and wise and we’re all too damn stupid to know what’s for our own good there are more people realizing there’s really only one party in Washington and the only way to win this rigged game is to elect not to play the game.

    1. Yes, the trouble with the word “fair”.

      Fair also divides collectivists from free marketers. To some, fair means everyone gets the same. To others, fair means that people keep what they earn. These contrasting meanings also relfect in the tax code.

    2. I’m curious what you imagine “take it or leave it” would look like.

      Refuse to pay taxes, and permanently lose rights and privileges as an American citizen? Presumably that would culminate (after ten years) in losing your citizenship all-together.

      1. Where do rights come from?

  3. Why should the govt protect you from some very unlikely military “invasion” but not protect a child or mom from the more likely possibility of cancer?

    1. Because we want that child, mother, and you to get cancer.

      Happy?

      1. I know what you are mfer.

        1. You’re a person who cares. A person with intense emotion. You’re smart too. I like you.

    2. Medicine doesnt prevent cancer, it treats it. Mayne if you weren’t stupid youd get the difference. Likewise cancer isnt the driving costs of medical care. Obesity related diseases are 10-15% of our costs. Unless you are advocating government mandated dieting, the cost you are asking for is to pay for peoples bad choices. If ACA was simply government covering cancer and other non lifestyle diseases I would have happily voted for it. It wasnt. Most of the coverage was for lifestyle choices of people.

      1. In war the bravest men often die protecting others. They do what has to be done for the good of others at great personal sacrifice.

      2. Healthcare spending is greatest on chronic problems and futile end of life care. We’re spending way too much money on saving everyone regardless of cost and providing healthcare to any low IQ illegal and their spawn that makes it over the border. It’s insanity.

    3. Because defense spending is an example of the “tragedy of the commons”, one of the few things that government is good* at solving. Medical spending, on the other hand, includes personal and direct incentives. Collectivist investment is unnecessary for medical advancement to occur.

      * Okay, government isn’t even very good at solving tragedy of the commons-type problems. But they are less-bad than the other ways we’ve tried so far.

    4. They shouldn’t do any of the above.

      -An-Cap, FTW

  4. I heard a lady named Marianne Williamson speak at a CNN townhall yesterday and I’ve never been more impressed or in agreement with a person running for public office. She is amazing. Just listen to heard her and give her a chance.

    1. Who the fuck is that? What party is she with? Most importantly of all, does she support ethanol?

      1. I had never heard of her before yesterday. When I looked yesterday CNN had posted her answers to the questions from the townhall. You can start there but I would suggest watching the whole damn thing. She’s that good.

    2. To be fair, shiny objects impress you.

      1. Please just listen to her. Give her a chance.

        1. You are certifiably insane, Mary Stack of Fort Worth, Texas. Take your meds like a good lunatic.

    3. She’s a Democrat. No thanks. ALL Democrats come with the current Democrat platform – unlimited low IQ illegals and refugees, massive taxes, censoring of free speech. She agrees with many of the same positions of Sanders and Warren. She’s for reparations.

  5. Also, Why shouldn’t the govt protect you from being homeless because you want to hang out in the coffee shop and write poetry but no one will buy your poems so you’re broke?

    We have a right to ‘happiness’ so it would make me happy if government gave me a weekly pay check for writing poetry so I can have a nice home and a car.

  6. The best thing about the media sowing discontent about taxes this year is that more and more Americans will realize that taxes are too high and want more cuts.

    Many/Most Americans got a lower tax bracket and a higher standard deductions, so they paid less in tax for 2018. Lies from the media notwithstanding.

    1. Did reason even tun an article on Iglesias from Vox bragging how they pushed the tax cut lies and it worked?

      1. Vox is a source for Reason writers. It shall not be questioned!

  7. At the federal level, given that (1) deficits mean nothing, (2) the debt means nothing, (3) spending means nothing, and (4) it’s all fiat money anyway, there is no rational justification for taxes of any kind or description. The ruling class should basically just keep on doing what it is doing–somehow deciding how much to spend each fiscal year and on what to spend it, based on no economic restraint whatsoever–and then just create the “money” required to do so out of thin air, and don’t bother the rest of us with their silly “tax” game and all it entails.

    Before you trot out images of wheelbarrows full of cash to buy bread, is what we do now that much different? Did all that quantitative easing (aka: money-printing) the Fed did from 2008 to 2014 increase inflation–nope, not even a blip.

    1. Taxes have definite purposes for those in power:
      1. They force the subjects to admit they submit.
      2. They delay the upcoming (hyper-)inflation that will deprive them of their power.

      You also mistake something, that (price) deflation is the nature of sound money, and we experience price inflation. And, if you want to see price inflation, try to buy a stock.

      -An Economist

  8. The biggest problem with our taxes is how increasingly they depart from reality and the rest of the world. The US has one of the most progressive tax rates in the developed world. Avowed socialists like AOC and Sanders want a more European tax system, but that would require significant tax increases on the middle class. Millions of Americans pay little or no taxes, while in Scandanavia, everyone pays significant taxes in return for generous welfare and redistribution.

    I would rather have lower taxes, mind you. But politicians have figured out how to increasingly put the tax burden on smaller and smaller numbers of Americans, so that they always have a majority of people to get outraged at little cost to themselves.

    1. “Avowed socialists like AOC and Sanders want a more European tax system, but that would require significant tax increases on the middle class.”

      This is their bait and switch. They will promise rate hikes on billionaires only, but the math and common sense show that won’t be enough to do what they want. The big money pot is on increases on the middle class due to the sheer number of workers, and they know it. If they get in power it will only be a matter of time before they raise rates on the people they “swear” they are out there to protect from the evil rich people.

    2. Yes, taxes will have to be at European levels but the reality is that the middle class won’t see any of the benefits because the tax increases will go to pay the lavish pensions of public unions and support the massive increase in illegals and non-productive immigrants.

      51% of legal immigrants are on some sort of welfare compared to 30% of the native born. It’s much worse with illegals. The progressives are looking for massive wealth redistribution and a gold plated healthcare system. To them, a house is a right, a good income without working is a right.

    3. And this is a fundamental threat to any kind of open democracy, not to mention a functional economy. The US as we know it will end (if it has not already) if the trend of fewer people paying all the taxes continues.

  9. Holmes was wrong. Taxes are what we pay because we aren’t a civilized society. If we were civilized, we would all gladly pay ourselves for the goods and services we consumed or wanted to give to others. Sending armed government agents to make you pay for my wants and needs is hardly civilized behavior.

  10. Like it or not Oliver Wendall Holmes was right. We live in a first world society and enjoy the benefits that come with that privilege. But that society comes with a lot of institutional and physical infrastructure. I think that too many people don’t even realize the amount of government involved in giving them a nice life. They think I don’t need government, well until it snows and I need the road plowed. I don’t need health care until I am sick. I don’t need schools until my kids are school age. I don’t need government until I do.

    1. I don’t need Gov until my house floods… I saw it first hand here in Louisiana. A place called Livingston parish home to the KKK and 90% Republican was terribly flooded in 2016. To a fucking man they had there hands out for help from the govt and they got that help more or less and definitely more than less.

      1. Socks talking to each other. How quaint.

    2. If government services are so valued, then the people will freely pay for them like they do all the other purchases they make. The tell that force is required to get the people to pay shows what a criminal racket government is.

      There is NOTHING government does that the private sector cannot do better, faster and cheaper. NOTHING.

      Cheat on your taxes….

    3. For big projects like highways, the govt is needed. For the minor stuff like plowing, there is nothing to stop people from banding together to pay for it via private contractors, just like they do for plowing out their driveways. Most of healthcare is private, there is no point in your mentioning it. Public education is a joke now, they are purely indoctrination centers. It’s high time that cities and towns give vouchers to parents and let them decide on a private school.

      Govt has become more corrupt and incompetent. You only have to look at how poorly run the subway systems are in NYC and DC. Is it because of liberalism, diversity, or both? California’s Golden Age was during its conservative phase, now the progressives are tearing it down. Small govt has much less chance abusing the citizens.

      Responsibility needs to be pushed back onto the citizens as the dependency on govt is making people fragile and disconnected.

      1. “there is nothing to stop people from banding together to pay for it via private contractors,”

        Isn’t this what government is? People band together form a government and then that government provides common services. How is your idea different?

        Also while much of health care is private, 2/3 is paid for by the government. This includes military, veterans, Medicare, Medicaid, and government employees.

  11. I think it’s interesting that most people equate taxes with the IRS, even though many people have to pay more money to other taxing entities. Why is that?

    1. Most people equate taxes with the IRS when in fact it is Congress that levies the taxes. The IRS is just the agency that collects the taxes. If you don’t like the taxes its not the IRS that you are mad at it is Congress.

      1. So, the IRS shouldn’t take it personally when the people en masse cheat on their taxes…

    2. Huh? The highest tax bill for most regular income earners comes from the IRS.

  12. The past few decades should have convinced us all that you can’t “starve the beast”. Even when taxes are cut, our congressional representatives keep bumping up spending, with no heed to what that does to the deficit. Therefore, the focus on reducing taxes (be it by tax cuts or non-compliance) is simply misguided.

    If you want smaller government, the focus needs to be on cutting spending.

    Every dollar the government spends will ultimately have to be paid for. It may be paid via taxes, via the inflation that comes from printing money, or via the consequences of defaulting on the debt, but one way or another, we will pay for it.

    Want to pay less? Focus on cutting spending.

    1. “But if I cut spending, how will I buy the votes necessary to keep me in office?” – Every politician in every democracy across time….

    2. Americans are increasingly reluctant to pay the IRS. Who can blame them?

      It’s a little easier to blame them when you consider these poll results.
      https://www.people-press.org/2019/04/11/little-public-support-for-reductions-in-federal-spending/

    3. Agree. As someone who used to work in a cost reduction role, I can attest that the only way to enforce spending cuts is to whack people on the head if they fail to do so. This election day, don’t forget to vote out any politicians who happened to increase spending (all of them).

  13. [“A tax is owed because a government orders it to be paid,” Adams added. “Nothing else is required.”
    Maybe that’s all right if what you’re ordered to pay for benefits you in an obvious and desirable way. ]

    If I find something someone offers for sale to be more of a benefit to me than the cash he’s asking for it, I’ll gladly buy it.

    There is nothing that “benefits me” for which I am justly plundered. Criminal organizations routinely offer “protection services ” for a fee, which if unpaid results in “bad things” happening to the object of the protection offered. Plundering me just sharpens the point that given the choice, I’d not have paid for it.

    Cheat thoroughly on your taxes….

  14. The feds will collect about $3 trillion in personal income and payroll taxes this year. That amounts to about $9200 per person.

    Want to shake up the people and the tax system? Institute a simple head tax, payable in cash (or maybe in work credits). I predict a rapid and dramatic call for reductions in federal spending.

  15. My neighborhood has no HOA, but there is a civic association which collects voluntary dues of $20/yr/home and always achieves 95% payment.

    The key to compliance isn’t enforcement. It’s ease of compliance. The same dynamic is true in anti-corruption efforts. The key isn’t enforcement, it’s limiting the efficacy of bribery.

    When our federal taxes are a voluntary $20/pp, there will be no need for collections or compliance rate strategies.

    1. I would expect a properly educated third-grader to refrain from making such a stupid statement.

  16. A voluntary compliance rate of 81.7 percent and dropping? For a government that has seen a decadeslong decline in measures of public trust, that level of compliance is surprisingly high.

    It’s only that high because of mandatory payroll deductions. In other words, it isn’t “voluntary” at all.

    Take away mandatory payroll deductions and require each citizen to write a check for his taxes in full and watch compliance plummet.

    1. They aren’t mandatory. You can set your allowances high enough to avoid all payroll deductions and pay in a lump sum.

  17. “But fear will only take you so far.”

    That’s why I have a good accountant. I will pay exactly what I owe, after all possible deductions and credits, and not one penny more—or less.

  18. What most Libertarians forget when trying to equate Republicans with Democrats is that while Obama and Trump may be operating under the same principle of punishing things they don’t like with government, the things Obama didn’t like (2A, payday loans) are good things, whereas the things Trump doesn’t like (leftist media and tech) are bad things. The next thing you need to ask yourself is which of these things can and cannot be regulated without the force of government. You should be noticing a trend by now.

  19. I’m not a “buy local” or “anti-big business” person by a long shot, but whenever I pay cash at a small business, I’m just hoping that they don’t report it!

Please to post comments